Inequality

OECD figures suggest that the UK has among the highest levels of income inequality in the European Union (as measured by the Gini coefficient), although income inequality is lower than in the United States, says a research briefing from the UK Parliament in March 2019. This week the think-tank the Institute of Fiscal Studies (IFS) announced the IFS Deaton Review, a major five-year investigation into whether there is a systemic bias in the country towards inequality. It has enormous implications for our thinking on a wide range of things, from public policy to societal behaviour and to the design of corporate governance and attitude to corporate behaviour.

Limbo and Further Limbo

Endless Brexit uncertainty was always going to be bad for corporate governance in the United Kingdom. But on one level, it seems it can be big business. The Financial Times reports that asset managers have paid UK politicians an awful lot of money for speeches and advice over the past year, to help with investment decisions.

Change and Evolution

Beware the Ides of March, as they can prove to be treacherous. At a time when Britain appears ever more deeply mired in political stasis over the Brexit vote, we have also seen a steady roll-out of government reforms to improve corporate governance and the running of our businesses. The aim is to restore trust in business and its place in society, although ironically the Edelman Trust Barometer of 2019 shows that the British public trusts business far more than it trusts the government – as mentioned in the last Governance Watch.

If these reforms are now seen not to deliver real change, the threads of that trust will scatter on the chilly wind.

We’ve just celebrated our 50th issue of Governance Watch, written by Dina Medland and we’ve learnt many things from covering the news. Governance Watch started as a simple idea – to give anyone involved with boardrooms, a place to read and digest the latest articles and headlines in one place. It’s important for people who shape corporate governance to consider the wider business landscape and to stay informed with events that may affect their decisions.

Diversity, Inclusion and Progression

We are more than half way into January, and when it comes to politics, the New Year feels very much like the old one. Facing multiple challenges around technological transformation, skills shortages and changing consumer aspirations, much of British business has been tearing its hair out on the uncertainty around Brexit for over two years. During that period the UK government has, in its pursuit of best practice and the lure of Britain for business and investment, taken many steps to raise the bar on corporate governance.

Executive Pay: Context is Critical

The socio-economic climate of Brexit has made boardroom pay - already a topic regularly simmered and stirred in the United Kingdom across a broad range of stakeholders – into rich ground for politicians.

Diversity: Gender, BAME and Power

Men in Britain might be playing up achievements in appointing women to positions of power, responsibility and leadership in business boardrooms and beyond, but most women will tell you (at least privately), that they think very little has changed in terms of the barriers to gender diversity.

Conflict of interest

The Patisserie Valerie saga, covered in the last Governance Watch, is the story that just keeps on giving on corporate governance.

The Chief and CFO had “second helpings of shares despite no explanation from the chain” reported the Financial Times, following up with a report about £2.9m made from bonus share schemes, and then the company’s admission that it had awarded these bonuses without informing shareholders.

Accounting

It has been only a week since first media reports on the goings-on at Patisserie Valerie, which said it had discovered "significant, and potentially fraudulent, accounting irregularities" and a £1 million unpaid tax bill. We were told: "The board has now reached the conclusion that there is a material shortfall between the reported financial status and the current financial status of the business." It thrust Chairman Luke Johnson, CEO Paul May, Finance Director Chris Marsh and auditors Grant Thornton into the spotlight.

Action, Not Words

This is the new mantra, aimed at British business and being chanted at it from all directions: ‘Action, Not Words’ (as noted in the last Governance Watch) when it comes to gender progression, ethnic representation and inclusion.

Diversity and Inclusion

Diversity and inclusion are essential for economic growth in a multi-cultural society. Many of Britain’s businesses are still struggling with this basic truth, trying to play catch-up with the urgency of the issue by shrouding it in definitions, and re-definitions. Should we call it diversity or should we call it inclusion? Actually, we need to put the two together with equality of opportunity via structural change, in the pursuit of better corporate governance and productive, responsible businesses.

Kingman Review

The consultation period for the independent review led by Sir John Kingman into the Financial Reporting Council (FRC), the UK’s accounting regulator and corporate governance watchdog, has just closed. It is intended to help ensure that the FRC’s role and powers are fit for the future and has come after years of accountancy in the media headlines for all the wrong reasons.

Critical Data Deficit

The failure of many FTSE 100 businesses to capture and disclose key workforce data is providing an incomplete picture of key business indicators, according to research just out from the CIPD, the professional body for HR and people development. It has looked at how workforce reporting has changed over the last five years and explores how transparent organisations are being about risks and opportunities relating to the workforce.

Data

There is irony in the timing of a £500,000 fine levied on Facebook today by the UK Information Commissioner’s Office (ICO) for two breaches of the Data Protection Act in the scandal involving Cambridge Analytica. The breaches occurred before the latest European General Data Protection (GDPR) came into effect in May, therefore the £500,000 cap is one set by the UK’s Data Protection Act 1998.

Social Value

In the current debate in the UK around how to achieve better corporate governance at a challenging time and amid changing business and workplace models in the face of technological transformation, there is a concept that is returning to the forefront - ‘social value.’ This week the UK government returned to the Social Value Act of 2013, extending its requirements in central government to ensure all major procurements explicitly evaluate social value where appropriate, rather than just ‘consider’ it. It comes after the Carillion collapse, which offers examples of the failure of governance on every level.

Gender Pay Gap

It is clearer than ever that for change to take place on gender equality, we need to have women in leadership positions. Nicky Morgan, the Conservative MP for Loughborough and the first female chair of the Commons Treasury select committee, made her astonishment at the gender pay gap in financial services public in an opinion piece in The Guardian, when she outlined next steps for the Women in Finance inquiry. Now we have its report, which finds ‘alpha male culture’ to be the main reason women don’t want to work in senior management in this industry.